If Chattanoogans Created Local Investment Co-op, Dividend Vouchers Might Become City Currency

Thursday, January 10, 2013

The lococentric theory of prosperity for Chattanooga seeks to enable local investors to put money into local businesses. 

Uncle’s laws prevent local investment, and years of propaganda by the financial industry makes people not see local possibilities for capitalization and profit, as we learned from Michael Shuman in his book “Local Dollars, Local Sense.” 

If Chattanooga is to withstand the coming buffetings in the national economy ignited by Uncle’s drunken excesses, residents might be wise to establish a vehicle whereby local business owners obtain capital from investors. 

Chattanooga needs an internal marketplace for money that bypasses Wall Street and Washington. 

Possibly the best vehicle for this development would be a co-op. 

Co-ops profitable, but members are shareholders
I’ve learned about the co-op business model from Robert McCarty, the communications director of Volunteer Energy Cooperative. His co-op, founded in 1935, sells electricity in 17 counties in East and Middle Tennessee, including Hamilton and Bradley with more than 8,000 pole line miles. Twenty-two such cooperatives operate in our state. 

Many types of co-ops work in our area. Credit unions are co-ops. One local art gallery is a co-op. Farmers’ market activists are creating a buyers co-op. 

Groups such as Tennessee Farmers Cooperative (made up of 73 co-ops) help farmers market milk, veggies, grain and tobacco. They supply credit and services.  

Co-ops differ from other businesses in that membership is voluntary. They are democratically controlled, with one vote per member. 

They operate at cost to the benefit of their members and usually are connected to a place.  “Cooperatives exist to meet the needs of their members for products and services and to meet these needs as economically as possible,” Mr. McCarty says. “They are not in business to make money for investors, as other types of businesses must do.”

Now here is the point that should thrill people who are willing to consider new ways to invigorate local economy.  

A co-op does not keep the excess money it makes. “Profit” is returned to the members. The dividend might be a “patronage refund” or a reduced rate or fee, Mr. McCarty says.  

Local investment co-op could be basis of city currency

Co-ops generally are connected with a given locale. A Chattanooga Investment Co-op would allow people residing in the area to put money into the pot. Co-op staff would select the most profitable local shops, service businesses and other entrepreneurs for support by “patient capital” (investors willing to wait on returns, with a long-term view).   

Eventually the co-op would become something like Co Lab, giving entrepreneurial advice to business that seek to become part of the local economy capital ecology. Financial service and business tips from co-op staff would serve business and investor — and enrich the local economy. 

If an investor wanted to invest solely in a favorite bike shop or a local manufacturer, the co-op would have to come up with ways for the investor to be rewarded for the particular choice. That rebate or refund would have to avoid becoming a federally regulated security. But practically it might become a form of local currency, representing the co-op’s claim to a certain part of selected company.  

Eventually investors could swap the rebates among themselves, and the chits could become a parallel currency under the co-op’s seal. 

Alternatively, if the co-op couldn’t arrange particular investments, rebates would be based on the sum of all the companies combined, and the rebate would represent the co-op itself, with profit generalized across all investors. 

Still, rebates in that form could become currency. The investor’s reward could be on the order of 5 percent or 10 percent, well beyond the 2.6 percent profit Mr. Shuman estimates comes from investment in the national economy. 

It’s fine to invest in public companies such as VW. But it’s better if we can invest in a locally owned company, so the profit will stay in Chattanooga


— David Tulis writes for Nooganomics.com, which covers local economy and free markets in Chattanooga and beyond.


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